3/16/2009 @ 2:50PM

Nardelli Talks Up Chrysler

Comments made by Chrysler‘s chief executive are more likely posturing than business strategy, as the auto maker aims to show it’s viable in a pitch to get more federal bailout money.

“Bob Nardelli and Chrysler management are very eager to use this Fiat deal as a means of persuading the federal government to continue lending money to Chrysler,” said William Holstein, an author and journalist who regularly writes about the auto industry. “The bottom line for me is that this is too little, too late.”

Bob Nardelli said in an e-mail to employees Monday that the technology
Fiat
would contribute in its proposed tie-up with Chrysler is worth $8.0 billion to $10.0 billion. Chrysler is talking about giving Fiat a 35.0% stake in exchange for access to Fiat’s small engines and small-car underpinnings.

“Production of vehicles for Fiat in North America will allow Chrysler to increase its plant utilization, helping to preserve and create in excess of 5,000 manufacturing jobs. The overall contributions from Fiat and the synergies we realize will far exceed the value of the government loans,” Nardelli said in his e-mail.

Nardelli’s comments come ahead of the federal government’s March 31 deadline for Chrysler and rival General Motors to show they can survive, and thrive, against competitors. Nardelli, in the Monday e-mail, said Chrysler can be viable even without Fiat or another partner.

Holstein does not believe this is possible. He said Chrysler’s divorce from former parent Daimler left Chrysler without key design and engineering capabilities, crippling the company’s production plans. (See “Auf Wiedersehen.”)

Holstein also said that any results from a tie-up between Chrysler and Fiat will take 18 months to materialize, as the two companies work to make, then test, new cars. That puts prospects of any synergies in a Fiat-Chrysler combination way off.

In its viability plan to the U.S. Treasury, Chrysler said synergies from the alliance would be worth a cumulative $6.9 billion in improved cash flow, and $7.4 billion in EBITDA benefits between 2009 and 2016.

Fiat has a 35.0% stake in Chrysler, which it essentially got for free after not committing to funding the company in the future. Instead, Fiat aims to provide Chrysler with important small vehicles and fuel-efficient powertrains to be produced at Chrysler factories, as well as distribution opportunities in key growth markets outside the U.S., where Chrysler is weak. (See “Fiat Buys American, And Gets A Good Price.”)